Dragon Oil agrees £3.7bn offer from Dubai-based ENOC

Dragon Oil has agreed a £3.7bn takeover after its suitor, Dubai-based Emirates National Oil Company, raised its offer for the business.

Shares in Dragon, which produces oil from Turkmenistan, have jumped 59p or nearly 9% to 729p on the news. ENOC, which already owns nearly 54% of its target, made an original (unspecified) approach in March , lifted its offer to 735p a share in May and has now raised that to 750p. This is its second attempt at buying Dragon after minority shareholders rejected a bid in 2009. A majority of the shareholders excluding ENOC have to approve the new deal for it to go through.

Analysts at Stifel said:

The revised offer represents the third price that ENOC, Dragon’s 54% majority shareholder, has put to the company. The level of the initial offer has not been made public.

We see fair takeover value at 700-750p per share, so this recommended offer is at the top end of our anticipated valuation range. The shares have been trading at a 5-10% discount to the level of the prior offer and we believe this discount should now close substantially. We will review our rating depending on how quickly this discount erodes.

The company also provided some operational news this morning, with the 100,000 barrels a day production target having been reached and expected to be maintained for the rest of the year.